A New Way of Thinking
The assault on the financial stability of small- and medium-sized acute care facilities continues unabated. Hospital closures and cutbacks are at an all time high and the forecast is not rosy.
President Clinton and Congress remain deadlocked over many healthcare issues, especially Medicare. It is not just whether to cut funds, but rather how much to cut and how soon to cut.
Anticipated Federal cutbacks will further challenge the survival of facilities servicing a large percentage of Medicare patients. Even if your facility today only services a small percentage of Medicare patients, it will likely be affected eventually. As those currently affected cut back, merge, and possibly close, unserved patients will look to other facilities for care maybe to yours.
There is no one, simple, easy "miracle cure."
It was believed in the early 1960s that cancer would be cured in 10 years (circa 1973, if I remember correctly). Here it is 30 years later and cancer is still not cured. But medicine has made a lot of progress. And the most important thing everyone has learned is that cancer is an extremely complex and encompassing medical problem. The most successful treatment plans involve many small, cumulative steps which are tailored to the individual patient and cancer involved.
Let's digress for a moment and think about our ancestors. For most Americans, our ancestors immigrated to the United States with nothing more than the clothes on their backs, a little money, and a strong desire for adventure and success.
Upon arrival in Colonial times, the most urgent need was for food, shelter and clothing. With an axe and a couple of oxen or horses, a strong and determined immigrant family was able to clear land and build a log cabin in a matter of a few weeks. On the cleared land, crops were planted for food and sheep raised for food and wool. From the wool sheared from the sheep, yarn was spun and knitted into clothing or woven into cloth.
This was the way of survival in Colonial times. But today, nobody would think of building a house using just an axe and a couple of cattle much less going into the business of building houses with these primitive tools. It's not cost effective to raise your own sheep, spin the wool, and hand loom the finished material.
Although these practices served us well in the past, they are no longer a practical or viable solution. What we are talking about is improving efficiency and productivity - accomplishing more with fewer resources in a shorter amount of time. Like the treatment of cancer, this will require a multi-faceted approach, imagination, and a new way of looking at things.
Cost vs Net Benefit
In their zeal to get the best deal, consumers often limit their focus
to just cost or out-of-pocket expense, instead of looking at the net benefit
a product or service will yield.
About four years ago my father and I had a long discussion regarding whether he should sell his house and move to an apartment or just remain put. His argument was that an apartment would end up costing him money because he would have to pay monthly rent since he had no mortgage. He was only looking at one side of the equation - the monthly mortgage.
In fact it really ended up costing him money to live in his mortgage-free home. He paid real estate taxes and maintenance costs which almost equaled the yearly rent of an apartment. But the real kicker was the fact that the investment he had tied up in his house was not earning him any money. If he had sold his house and invested his money in an interest bearing plan, he could have lived in a luxury apartment and put money in the bank every month on top of the money he already had! How does this apply to me?
This example directly relates to acute care, because the investment a facility has tied up in its receivables is generally not interest bearing. Receivable days are calculated as the average number of days it takes from the time a patient is billed until the time payment is received. In reality the receivable days is generally understated, because an account is not considered a receivable until it is billed. This means that if it takes an average of 2-4 weeks to complete a chart and submit a bill to Medicare after a patient has been discharged, then the true receivables are in reality that much larger.
To roughly work out the cost of holding non-interest bearing receivables, lets assume that you are a 50-bed facility running at 50% occupancy. You may have in the vicinity of 20 discharges per week with an average reimbursement of $3,500 per discharge. The minimum receivable days from the time a patient was discharged until your facility actually received a payment would be the time it takes to: gather the supporting documents for a chart; do the coding and verification; obtain approvals; generate a UB-92 Claim Form; transmit that claim to your fiscal intermediary; and wait for a check. We are talking 30 -60 days, assuming there are no coding errors or other clerical problems.
This translates to $280,000 to $560,000 tied up in some form of receivable. The carrying cost varies from $14,000 to $84,000 depending whether: a) you are losing the interest you could be making on a low paying investment account (say 5%); or, b) you are actually paying interest on an operating loan (say 15%) to cover the salaries and costs incurred while treating this patient.
Every day these outstanding receivables can be reduced translates to a net annual savings of $450 to $1,400. This may not seem like a lot, but a 10-day reduction yields an annual savings of $4,500 to $14,000 annually! Imagine if every department could generate a similar saving due to increased efficiency. We are talking $50,000 to $200,000 a year not bad for a new way of thinking!
Where do you start?
You don't need to do an elaborate or exhaustive study. Just take an objective
look at your department's work flow. Track a few charts as they go through
the coding and approval process to determine where the bottlenecks are
and where the opportunities are for improvement.
Most likely you will find that some charts will sail right through, while others get sidetracked and sit around. It may be the more complicated charts that get bogged down, or it may be a particular physician's charts that lag behind, or it may be that a new coder is having difficulty keeping up with the workload.
Until you have a feel for the bottlenecks, it is very difficult to propose effective solutions to your management.
Tools of the Trade
If your Coding and/or DRG Optimization process is completely manual, then
you really need to investigate a personal computer based system! You certainly
wouldn't consider making a dress without a sewing machine. Yes, it can
be done with a needle and thread, but it just takes too long and the manual
stitching quality just isn't as consistent.
Today it is very cost effective to automate the coding process. Several coding systems are available and one vendor even offers an affordable monthly rental.
If you already have a computer system, does every coder have access to it when they are coding? Do you find coders waiting in line for access to the system? If you do, then you may want to seriously consider adding another workstation to your current system or investigate an alternative vendor for the additional unit.
Is your system easy to use? Does your Encoder work the way you have been trained? If your training has been the book approach (i.e., using the Volume 2 Alpha Index), then encoders which prompt you with a series of questions are likely to be frustrating and slow.
Timely Updates Matter!
Every October there are traditionally 200 or more ICD9CM Coding changes,
many CC Exclusion list updates, and several DRG logic changes. Therefore
it is important that your system, either manual or computerized, is updated
when you start coding your October discharges.
A seemingly simple change like removing a single code from the List of Valid Complications and Comorbidities (CC List) can have a significant impact on your facility's reimbursement. Take for example 276.8 Hypotassemia which is no longer considered a valid CC as of October 1995. In Fiscal 1996, this seemingly minor change will result in a net reduction of payments amounting to nearly $100 million dollars, or an average of $2,000 per hospital!
At a very minimum you need
to have updated ICD9CM files and a DRG Grouper installed and make sure
they have been tested for accuracy.
If your system does not automatically select the appropriate DRG grouper and ICD9CM logic for the discharge date of the patient, then you probably end up holding some of your October cases until you finish processing your pre-October cases. Assuming you hold these new cases for two weeks, the additional receivable costs your facility between $600 and $1,700 every year!
Act Now!
Don't wait another day to begin a new way of thinking. Your institution
benefits because any improvements in coding efficiency adds much-needed
revenue. You gain confidence and find new ideas for improvement.
Even small improvements will make a positive contribution to your institution and your career path.